Everywhere you look, artificial intelligence (AI) is impacting the way we live. Whether it’s how we get around, how we connect with others, or even how we shop -- AI is here to stay.
Financial service providers and FinTech firms leverage AI and machine learning to streamline otherwise slow and lengthy processes in banking with unprecedented speed and accuracy.
How Is AI Used in FinTech?
FinTech companies and financial institutions use AI and machine learning to increase efficiency and provide consumers with more relevant, affordable, and intuitive financial services and products to meet their banking needs.
Applications for Artificial Intelligence in FinTech
There is a growing number of different applications FinTech companies are tapping into artificial intelligence for, and they’ve had major impacts on how consumers manage their finances.
- Digital Financial Advisors
Chances are, you’ve logged into your bank’s online portal recently and saw the option to ask for help from a digital financial advisor. These AI-powered “chatbots” are extremely popular because they can be used for a variety of tasks.
From coaching consumers on financial goals around spending and savings, or providing reminders about payments, having a digital financial assistant increases consumer engagement and improves their overall experience with your financial product.
- Transaction Search and Visualization
AI can be leveraged to do more than be on standby as a personal financial advisor; it also enables consumers to intuitively search and visualize their transaction history with ease just by asking a question.
Known as chatbots for their use of conversational AI, consumers can ask a question related to their account balance, general account information, transaction history or spending habits for the AI to quickly process the queries and display the results.
The AI is built using a type of machine learning model known as Natural Language Processing (NLP) that lets the AI process the meaning of consumer inquiries, and present them back to the user as if they were interacting with a human representative at their bank.
Bank of America’s chatbot “Erica” is an innovator with such technology, and helps consumers maneuver their finances online and instantly find specific transactions with merchants without the need to review a bank statement.
- Customer Risk Profiles
Artificial intelligence is used to automatically categorize customer risk profiles from low to high for simple viewing. With this information, AI can also automatically recommend consumers the financial products they may need, and reduce the time and effort required to calculate scores manually on an individual basis.
- Credit Risk Assessment
AI can also be used to automatically assess a customer’s credit risk score so advisors can create the most accurate offer for a consumer. Whether they’re looking to open an account, procure a loan or determine interest rates on an investment, the fast and easy access to credit risk models lets banking advisors make the most relevant offers to consumers without having to conduct the risk assessment themselves. Learn more about credit risk modeling here.
Machine Learning In FinTech
Machine learning and AI are often used interchangeably because of their similarities.
Machine learning is a consolidated pool of information that is constantly improving to help a machine perform a specific task to the best of its ability. The information is trained and refined over time to perform assigned tasks, so over time, tasks are completed faster and more accurately than each time before.
Put simply, machine learning is the means to an end of achieving AI results.
Machine learning in banking also has a variety of different applications it can be used for things such as algorithmic trading, approving loans, account and identity verification, valuation models and risk assessments.
The Future of AI in the FinTech Market
As AI continues to improve across industries, the FinTech market will likely see an increase in AI and machine learning adoption to keep up with increasingly high consumer standards for simple and intuitive banking experiences, and the sheer demand of online banking services. AI serves as the key to creating the next-gen banking experience consumers are demanding.
Here is more information about the future of artificial intelligence in banking.
- AI will be used to qualify more first-time home buyers.
As mortgage lenders face the largest generation of first-time home buyers entering the housing market, they’re looking for ways to streamline their qualification process so they can qualify more consumers at unprecedented rates. AI and machine learning will allow them to handle the demand, and offer first time home buyers the most relevant financing options available to them.
- Fraud detection and risk management will only get stronger.
AI and machine learning has transformed the security of accounts and payments in the banking industry. As processes continue to be corrected and refined over time, they will only become even better ways for financial institutions to mitigate fraud and improve the financial landscape for all consumers.
- FinTech firms will use AI to strengthen their talent pools.
FinTech firms are always looking for the absolute best candidates to help them develop their tech stacks and provide consumers the best banking experience available. Firms can use AI and machine learning to close their talent gaps and improve talent recruitment and management processes.
- Compliance cost growth will decline.
Meeting industry compliance standards can be costly to any financial institution. Having an AI and machine learning model in production lets FinTech firms make changes to the model as needed while the ability to meet compliance regulations gets faster and stronger. The longer the AI or machine learning model is used to meet compliance standards, the faster FinTech firms will be able to reflect changes on the fly to save time and money better spent providing consumers with quality services.
Bringing FinTech Ideas To Life With Envestnet | Yodlee
As the financial industry continues to transform by leveraging AI and machine learning for countless applications, FinTech companies like Envestnet | Yodlee are providing consumers the tools and solutions needed to control their financial destinies.
Envestnet | Yodlee’s artificial intelligence API and finapp, AI FinCheck, plays an important role in Yodlee’s suite of Personal Financial Wellness solutions. The app serves as a Virtual Financial Assistant for consumers that dynamically monitors financial health and provides actionable guidance.
AI FinCheck uses a consumer's account and transaction data to gauge their financial health, share contextual and personalized best practices, and suggest proactive actions to automate and improve their finances over time.
FinTech innovators can deliver better outcomes and solutions for their customers by applying artificial intelligence and machine learning like Envestnet | Yodlee. Start innovating with Envestnet | Yodlee